General Motors In Turmoil As UAW Strikes Ignite Financial Firestorm, Analysts Predict Multi-Million Dollar Meltdown

Mizuho analyst Vijay Rakesh reiterated a Neutral rating on General Motors Company GM, lowering the price target to $38 from $40.

The analyst lowered the price target, citing an EV ramp and UAW concessions pressuring margins. 

The company reported third-quarter FY23 sales growth of 5.4% year-on-year to $44.13 billion, beating the analyst consensus estimate of $43.68 billion.

In Q3, EBIT margin was 8.1%, down 210bps y/y. Per the analyst, a $200 million impact from the UAW strike weighed on margins, offset partially by strong pricing and higher volume. 

Rakesh adds that the UAW strike continues to impact its operations with a current $200 million/week EBIT impact at "current" strike levels. 

GM plans to announce an updated outlook once a new UAW contract is ratified and its employees return to work, the analyst adds.

While GM continues to execute well with expectations of ~$2 billion of fixed cost savings through C24E, the analyst writes that the key for GM will be the increased UAW headwinds and aggressive competitor pricing, putting COGS and EV profitability under pressure. 

GM's net margin in SepQ was 6.9% with EV volume mix at ~3% vs. Tesla, Inc TSLA net margins at 8% despite 30-40% price cuts for Model 3/Y/X in 2023 thus far, the analyst adds.

According to Rakesh, ICE remains strong, with GM continuing to take U.S. market share, offset with some moderating 2024E pricing commentary. 

The analyst lowered FY24 Revenue/EPS estimate from $177 billion/$6.42 to $171 billion/$6.35 with potential pricing/margin headwinds.

Benchmark analyst Michael P. Ward reiterated a Buy rating on General Motors with a price target of $60.00. 

GM estimated the UAW strike in the U.S. cost the company $200 million in EBIT income in the third quarter, but the impact should expand in the fourth quarter, Ward notes.

The analyst estimates the strike is costing GM about $25 million a day, and if the strike continues through the end of October, the impact will be about $250 million.

December has the lowest number of production days in the year, limiting GM's ability to fully recover lost production, pushing the recovery into the first quarter of 2024, Ward adds.

Price Action: GM shares closed higher by 1.58% to $29.01 on Wednesday.